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Global employment outlook newsletter - September 2012

This newsletter provides the latest ILO global and regional unemployment projections. We show that global youth unemployment is to increase further this year to 12.7%, as the euro zone crisis has started to affect emerging economies in East and South-East Asia. The newsletter argues that countries should address the rising tide of youth unemployment by offering training and employment guarantees, which come at an affordable cost of not more than 0.5% of GDP.

Global employment outlook newsletter - September 2012

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September 2012 ILO Global Employment Outlook Global spill-overs from advanced to emerging economies worsen the situation for young jobseekers Young unemployed people around coming years, after having suffered estimates and projections of global the world may not see their from the largest increase among all and regional unemployment rates situation improve soon. As the euro regions at the beginning of the from 2007 to 2017). area crisis continues in its second crisis, but principally because year, the impacts are spreading discouraged young people are In certain regions, the regional further, slowing down economies withdrawing from the labour market youth unemployment rate disguises from East Asia to Latin America. and not because of stronger hiring large variation across countries. In Other regions such as Sub-Saharan activity among youngsters. Despite particular in the Developed Africa that had expected faster this decline and even though the Economies region, youth improvements in their youth labour young unemployed in advanced unemployment rates range from markets will now take longer to economies represent 13% of the over 50% in Spain and Greece to revert to levels seen prior to the world total, the global youth less than 10% in Germany and global financial crisis. In developed unemployment rate is expected to Switzerland. Even when the youth economies, youth unemployment continue to edge higher beyond unemployment ratio is considered – rates are expected to fall over the 2014 (chart 1 provides the ILO’s the number of young unemployed in Chart 1: Global and regional youth unemployment rates (15-24 years) 30.0 27.6 28.4 27.5 27.1 26.7 27.0 26.4 Middle East 25.7 25.0 North Africa Youth unemployment rate (%) 20.0 Centerl & South- Eastern Europe 17.6 17.5 17.3 Developed economies and 17.0 17.2 17.0 European Union 16.9 South-East Asia & 15.6 15.0 the Pacific 14.7 14.6 14.6 14.7 14.2 Latin America & 13.5 12.8 13.1 the Caribbean 12.7 12.8 12.9 12.5 12.7 Sub-Saharan Africa 11.9 11.9 11.8 12.0 WORLD 9.7 9.7 10.4 10.0 9.6 9.8 South Asia 9.5 9.7 9.2 East Asia 5.0 2007 2008 2009 2010 2011 2012p 2013p 2014 p 2015p 2016p 2017 p Note: Youth unemployment rates for young job seekers between 15 and 24 years in per cent of active youth population. Estimate (e) for 2011; Projec- tions (p) for 2012 through 2017. Source: ILO, Trends Econometric Models, July 2012; IMF World Economic Outlook, July 2012.Global Employment Outlook: Bleak Labour Market Prospects for Youth 1

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the total youth population – Box 1: Youth unemployment rates vs. ratios in international comparison numbers vary from over 20% in Spain to less than 5% in Germany Cross-country comparisons of the extent of youth unemployment are complicated by the (see box 1). fact that large differences exist across countries regarding the labour market participa- tion of people below the age of 25. Partly, this is related to differences in the education The deterioration in youth labour system as countries with a well-developed vocational training system consider young markets is also visible in other people to be employed while they are following their (part-time) vocational education. In indicators. In the EU, part-time contrast, in countries with full-time education systems only those who have completed a work among youth has grown faster first secondary degree or have dropped out of school and are seeking work are typically than among adults, and considered to be part of the labour force. Such effects of institutional differences across increasingly appears to be driven countries on measured youth unemployment can be addressed by considering the youth unemployment ratio rather than the rate. As chart 2 shows, this results in lower by a lack of alternative employment values for the youth unemployment ratio because of a larger denominator (the youth opportunities for young people (see population rather than the youth labour force) compared to the youth unemployment http://www.ilo.org/global/ rate. Youth unemployment ratios, therefore, have a tendency to underestimate the research/global-reports/global- extent to which joblessness prevails among young people, in particular when youth employment-trends/youth/2012/ labour force participation is low and youth unemployment rates are high as illustrated lang--en/index.htm). Also, a recent by the fact that countries lie further away from the dotted, 45 degrees line in chart 2, analysis estimates the share of the higher their youth unemployment rate and the lower their youth labour force partici- young European workers in the pation rate is. informal economy at about 17 per cent, compared to 7 per cent for Chart 2: Unemployment rates vs. unemployment ratios in selected countries (2011) prime age workers. On the other hand, the bleak situation for young jobseekers has triggered only 25.0 limited cross-border movements of You th nemployment ratios (%) young people but a lengthy and 20.0 Spain stretched-out recovery is likely to Macedonia, FYR intensify the quest of young, more mobile people to seek their 15.0 Ireland Greece UK fortunes abroad. Sweden Portugal Iceland New Zealand South Africa Croatia Latvia Slovakia 10.0 Denmark Finland The difficulties of young people to Australia Canada Poland Lithuania France Italy find gainful employment reflects NetherlandsMalta Bulgaria Belgium Hungary Austria the overall weak state of labour 5.0 Germany Mexico markets around the world (see Japan Israel Luxembourg table 1). Global output has grown Korea, Rep. weakly over the past six months 0.0 and is not expected to accelerate in 0.0 10.0 20.0 30.0 40.0 50.0 60.0 the near future. As noted in the You th unemployment rate (%) WTO’s World Trade Report 2012, global trade has also decelerated Note: The chart shows the relationship between the youth unemployment rates and youth unemployment ratios for selected countries in 2011. The dotted line represents the 45 de- sharply as global demand grees line. especially in advanced economies Source: ILO, Key Indicators of the Labour Market. has faltered. This has created In addition, cross-country comparisons of youth joblessness are further complicat- global spillovers, leading to a slow- ed by the fact that youth unemployment rates tend to understate the problem of down of activity in emerging young people on the labour market in many developing and emerging economies. economies in East and South Asia In these countries, labour force participation rates are typically higher among and Latin America. High private young people than in developed economies. As alternative income opportunities and public debt in the advanced or well-developed social protection systems rarely exist in these countries, young economies is leading to private people are eager to take up any form of employment, be it in the informal econo- households and firms deleveraging my or below their education level. This tends to suggest a youth employment to relieve their high debt burden situation that is better than what is actually experienced by those in the labour through increased savings rates, market who have to face low, unstable incomes and weak prospects. and austerity measures for public sectors. The combined downward pressure on both private and public that could bring the world a worsening of the credit crunch consumption and investment is economy closer to another global that stems from unresolved dragging down aggregate demand recession by the end of 2012, sovereign debt problems in and growth. Therefore, at the further threatening a sustained Europe. The bust of the earlier current juncture there is a labour market recovery. housing boom in several advanced s u bs ta nt i a l r isk tha t th i s economies together with a general simultaneity may trigger yet Additional downward pressure on need for deleveraging in the another significant downward spiral the global economy is coming from private sector left banks withGlobal Employment Outlook: Bleak Labour Market Prospects for Youth 2

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Looking ahead, a pre-condition for currently exist in several countries policies (such as intensive job improvement in youth – could help get young job-seekers matching efforts and further skills unemployment is a return to a off the street and into useful development) with payroll tax cuts sustained growth path and a activities and act as a safeguard for employers hiring young people. general strengthening of the labour against further economic and This programme was estimated to market. Without additional jobs social stress. Estimates show that cost less than 0.1% of GDP in being created, young people cannot such programmes can come at 2008. Broader employment expect to find employment. very limited costs, less than half a guarantee programmes targeting However, given the sheer size of per cent of GDP among European persons of all ages living in poor the problem, even a quick countries (see table 2), depending households have also been acceleration in growth may not on administrative costs and actual enacted in some countries, most provide sufficient job opportunities take-up. notably India. The cost of India’s in a short period of time. To National Rural Employment address this, the ILO is calling for This is consistent with costs Guarantee programme has been targeted measures to improve the observed in existing youth estimated at around 1% of GDP. In labour market situation, especially employment guarantee times of constrained public for youth (see http://www.ilo.org/ programmes, such as those finances, this may seem like a wcmsp5/groups/public/---ed_emp/ enacted in Austria, Denmark, large additional burden but it will documents/publication/ Finland, Norway and Sweden. In be less than the additional costs wcms_151459.pdf). For example, Sweden, a jo b guarantee that come from young unemployed providing employment or training programme for youth enacted in people permanently losing touch guarantees for (targeted groups of) the 1980s and reformed in 2007 with the labour market. young people – such as those that combined active labour market TRENDS Unit Employment and Labour Market Analysis Employment Sector ILOGlobal Employment Outlook: Bleak Labour Market Prospects for Youth 4